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Top 5 Things To Know In The Market On Thursday

EconomyJun 21, 2018 05:37AM ET
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© Reuters. Top 5 things to know today in financial markets - Here are the top five things you need to know in financial markets on Thursday, June 21:

1. OPEC Gathers In Vienna

Oil ministers from the Organization of Petroleum Exporting Countries (OPEC), Russia and other major producing countries will meet in Vienna to review their current production agreement, with a decision due Friday.

OPEC and non-OPEC producers have been curbing output by about 1.8 million barrels per day (bpd) since January 2017 to prop up oil prices and reduce high global oil stocks.

The strategy has shrunk a global crude glut, but with oil prices recently hitting 3½-year highs, the producers are trying to reach consensus on easing the output caps to prevent the market from overheating.

Saudi Arabia's influential oil minister, Khalid Al-Falih, said that global consumers were demanding more crude supply and that he was confident a deal could be struck that would satisfy all stakeholders.

Russia has pushed for returning 1.0 million bpd back into the market relatively quickly, while Saudi Arabia would like to try a lower amount.

However, not all OPEC members agree. Iran, Venezuela and Iraq have all said the current production agreement should stay in place.

Oil prices were on the back foot ahead of the meeting, with Brent crude futures sliding $1.58, or around 2.1% to $73.16 per barrel, while WTI crude futures were at $64.50 per barrel, down $1.21, or about 1.8%.

2. Bank of England Policy Announcement

The Bank of England (BoE) is widely expected to keep interest rates on hold at the conclusion of today's monetary policy committee (MPC) meeting, though most of the focus will be on how strong the signals are for the possibility of hikes further out in 2018.

A decision is due at 1200GMT (8:00AM ET), with no news conference, though BoE governor Mark Carney will deliver a speech at the annual banker's dinner at London's Mansion House this evening.

Financial markets are pricing in a little over a 50% chance of an August hike, when the BoE next updates its economic forecasts and holds a news conference.

The British central bank has said it wants to be sure the economy has recovered from near-stagnation in an unusually cold early start to the year, before pushing ahead with only its second rate hike since before the global financial crisis.

The pound sat near its lowest level since November 2017 ahead of the BoE's monetary policy decision, with GBP/USD at 1.3140, after slipping overnight to a seven-month low of 1.3125.

3. Wall Street Futures Point To Lower Open

U.S. stock futures pointed to a lower open, putting the Dow Jones Industrial Average at risk of an eighth down session in a row, as nagging trade tensions between the United States and China kept investors on the edge.

At 5:35AM ET, the blue-chip Dow futures were down 100 points, or around 0.4%, the S&P 500 futures shed 9 points, or 0.3%, while the tech-heavy Nasdaq 100 futures indicated a loss of 21 points, or roughly 0.3%.

On Wednesday, the blue-chip index fell for the seventh-straight day, its longest streak since March 2017, while resilient tech stocks rallied as the Nasdaq made a new record high.

In earnings news, Kroger (NYSE:KR), Darden Restaurants (NYSE:DRI) and Red Hat (NYSE:RHT) are the most notable companies to report quarterly results.

Elsewhere, European markets were down across the board, with German automakers faring the worst after Daimler (DE:DAIGn) warned profit would be hit by higher tariffs.

Earlier, Asian stocks closed mixed, with China markets falling once more amid worries over the ongoing trade dispute between Washington and Beijing.

4. Bank Investors Await Fed Stress Test Results

Investors expect banks and other financial institutions to announce large returns of capital to shareholders after the Federal Reserve publishes the first set of results from its annual stress test late Thursday.

Banks will be able to unveil capital return plans for the coming year next week after the Fed issues its second set of results that determine how much of a capital buffer the banks need.

The Fed examines the health of the balance sheets of the biggest financial firms every year to ensure that they have enough capital to withstand a shock to the system in the wake of the 2007-09 financial crisis.

Many of the 38 financial firms undergoing the test, including JPMorgan Chase (NYSE:JPM), Citibank (NYSE:C), Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS), are expected to boost dividends and share buybacks due to higher profits on the back of tax cuts and rising net interest income.

5. Dollar Rises To Fresh 11-Month High

Away from equities, the dollar rose to a fresh 11-month high against a currency basket, supported by the diverging monetary policy outlook between the U.S. and Europe.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was a shade higher at 95.20, a level not seen since July 2017.

Demand for the dollar was underpinned after Federal Reserve Chairman Jerome Powell on Wednesday reiterated that the case for continued gradual rate hikes remains strong.

In the bond market, the U.S. 10-year Treasury yield stood at around 2.91%.

Investors will get a few pieces of economic data to digest this morning, with the weekly report on initial jobless claims, the Philly Fed’s reading on manufacturing activity in June, and the FHFA’s April gauge of home prices all set for release.

Top 5 Things To Know In The Market On Thursday

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